American Universal Insurance Company v. Chauvin

• Decision Date: 08 April 1964
• Docket Number: No. 20902.,20902.
• Citation: 329 F.2d 174
• Parties: AMERICAN UNIVERSAL INSURANCE COMPANY, Appellant, v. Edgar S. CHAUVIN, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

329 F.2d 174 (1964)

AMERICAN UNIVERSAL INSURANCE COMPANY, Appellant, v. Edgar S. CHAUVIN, Appellee.

No. 20902.

United States Court of Appeals Fifth Circuit.

March 12, 1964.

Rehearing Denied April 8, 1964.

Robert E. Leake, Jr., New Orleans, La., Hammett, Leake & Hammett, New Orleans, La., for appellant.

Raymond H. Kierr, New Orleans, La. (Johnny X. Allemand, Thibodeaux, La., Kierr & Gainsburgh, New Orleans, La., of counsel), for appellee.

Before BROWN, MOORE,^* and GEWIN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

The Erie problem, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, here is not whether significant signposts point the way to decision. Rather, it is whether the signs either exist or significantly outline a detour around the roadblock which stops Appellant's claim in its tracks.

It begins and ends in Louisiana this way. Under the Louisiana Workmen's Compensation Act, the compensation Insurer,¹ as does the injured Employee, has a right of action against a third party tort-feasor.² The Employer-Insurer's right of recovery rests on statutory subrogation to the rights of the injured employee. The Insurer, in effect, has a first claim on any third party recovery to the extent of "compensation actually paid."³

The term "compensation actually paid", though not expressly defined, is understood by all to include expenditures by the Insurer for necessary medical and hospital services. The controversy centers, not on the nature of the medical services or expenditures, but rather on the amount. This comes about because the Compensation Act prescribes a statutory maximum of $2500,⁴ but in effect authorizes an employer to procure at its sole cost insurance for coverage (including medical) beyond the requirements of the Act. LSA-R.S. 23:1165.

So the precise question presented here is whether in the distribution of the third party recovery, the insurer is entitled to reimbursement from the third party for excess medical costs, excess meaning in excess of the statutory maximum of $2500.⁵ In the order for distribution of the agreed compromise settlement recovery, the District Court disallowed reimbursement for excess medical.⁶

Without being swayed by equitable pleas against this somewhat unusual result, the District Judge frankly did his Erie duty on the basis of DeRoode v. Jahncke Service, La.Ct.App., 1951, 52 So.2d 736. But before discussing this case, it is well to emphasize at the outset that the only controversy presented in the District Court concerning this problem was between the Insurer and the third party defendants. The Insurer was not a plaintiff against the injured employee. Though each was contesting vigorously for priority in distribution of the fund, no claim was asserted there or here by the Insurer against the injured employee. The Insurer's position was exactly what it would have been had the third party case been tried to judgment. Perhaps more precisely, the Insurer's position was as though it alone had sued the third party defendants. The Insurer's rights against the third party derived solely from subrogation to the employee's rights, and there being no conventional (consensual) subrogation, the Insurer's claim rested entirely on §§ 1101, 1103 of the Compensation Act (notes 2, 3, supra).⁷

Without a doubt DeRoode is this very case. Moreover it is one determined by the highest writing Court thus far to speak for Louisiana. Ford Motor Co. v. Mathis, 5 Cir., 1963, 322 F.2d 267, at 269, n. 1; Smoot v. State Farm Mutual Automobile Ins. Co., 5 Cir., 1962, 299 F.2d 525, 529, n. 9; United Serv. Life Ins. Co. v. Delaney, en banc, 5 Cir., 1964, 328 F.2d 483, at 486, 487, nn. 5-9. As the opinion reflects, there the Insurer by the appropriate standard excess medical coverage endorsement "undertook to provide, in addition to the statutory medical * * * required by the * * * Workmen's Compensation Law"⁸ reasonable and proper costs as the Insurer believed to be necessary. There, as here, the Insurer in the suit against the third party defendant claimed that it had become subrogated "to the extent of any payment to all rights of recovery therefor vested by law either in the employer or in any employee."⁹ That Court, as did the trial Court below, inescapably had to "determine what is the extent of the right to which the Insurer is automatically subrogated under the compensation law * * *." Its response was plain and emphatic:

"We think, however, that the statutory provision LSA-R.S. 23:1101, 23:1103, notes 2, 3, supra cannot be interpreted as including any sums in excess of those for which, under the act, the employer or Insurer is mandatorily liable and should not be held to include any other amounts or sums for which he may, by contract or agreement, voluntarily make himself liable. The employer or Insurer could, of course, pay such additional amounts and, by conventional subrogation from the employee, obtain the right to demand those amounts back from the person at fault, but it is not shown here that there has been any such conventional subrogation." 52 So.2d 736, 744.

The Insurer here does not minimize either the existence or the decisive nature of this holding. It recognizes that the District Court, as is this Court, was bound by it under Erie. The Insurer recognizes that it has the laboring oar in demonstrating a shift in the currents by some recognizable, objectively legal-hydrographic data transcending a mere psychoanalysis of Louisiana Courts in terms of personal changes or developments in socio-legal outlook. It undertakes to carry that burden in several ways.

The first effort is to stress equitable principles and particularly that of subrogation with heavy reliance upon such cases as International Paper Co. v. Arkansas & Louisiana M. Ry., La.Ct.App., 1948, 35 So.2d 769. There, the Court pointed out, the third party recovery provisions of the Compensation Act, notes 2 and 3 supra, "* * * in effect, simply invests the employer with the right to recover of the person through whose fault the employer has had to pay compensation, the amount paid on that account and amounts for which he is obligated to pay." Echoing Professor Malone's textbook, Malone, Louisiana Workmen's Compensation Law and Practice 470, 477, the Court in Geter v. Travelers Ins. Co., La.Ct.App., 1955, 79 So.2d 120, emphasized the avoidance of double recovery. "A mere reading of the Louisiana Workmen's Compensation Law, L.S.A.-R.S. 23:1101-23:1103, reveals that the statute does not contemplate a full double recovery by an injured employee in both tort and workmen's compensation." Consequently, the Court held, "The victim should not be entitled to both full damages and to compensation."

Conceding that the Insurer's rights to participate in the third party recovery amounts simply to statutory subrogation pro tanto, Lowe v. Morgan's Louisiana & T.R. & S.S. Co., 1922, 150 La. 29, 90 So. 429, we find these principles utterly unhelpful in this problem. At the outset one thing seems quite plain. These general principles did not spring into being subsequent to 1951, the date of DeRoode, and that Court, at least authoritatively for Erie, inescapably rejected them.¹⁰

A more substantial argument is advanced that there has been a significant change in the underlying Louisiana principles since DeRoode. This argument, somewhat involved, and approaching juridical psychoanalysis, rests finally on an assertion that the judicial "climate" or "atmosphere" has changed since DeRoode. The Insurer, by a perfectly lawyer-like analysis, escapes any aspersions for this approach. Without going into great detail, it runs this way. Under cases such as Kinder v. Lake Charles Harbor & Terminal Dist., La.Ct.App., 1947, 31 So.2d 498, and earlier practices by employers or their insurers which sometimes compelled the injured employee to agree to reimburse such excess medical, Williams v. Campbell, La.Ct. App., 1939, 185 So. 683, the Louisiana Courts frequently referred to this excess medical as a "gratuity."¹¹ The next phase of the argument is that subsequent to 1951 the Louisiana Courts have definitely established that the injured employee has legally enforceable rights against the insurer for the recovery of excess medical. In Cummings v. Albert, La.Ct.App., 1956, 86 So.2d 727, the Court squarely held that an employee had such a legal right.¹² It based its decision on the principle of a third party beneficiary contract — there described in the engaging terms of the civil law as a stipulation pour autrui — a result indeed not surprising in view of the plain language of LSA-R.S. 23:1162, note 1, supra. Some consider that this was carried further in Miller v. Continental Casualty Co., La.Ct.App., 1962, 146 So.2d 842, grant of cert. withdrawn, 1963, 244 La. 649, 153 So.2d 875, since that involved the unusual provision of the Louisiana Compensation Act which makes prime contractors liable for injuries to employees of subcontractors. See LSA-R.S. 23:1061. There an injured employee of a subcontractor had exhausted the statutory maximum medical benefits provided by his employer's compensation insurance. Nevertheless, he was permitted to recover excess medical from the compensation insurer of the prime contractor.

Without a doubt, both Cummings and Miller are strong cases in the sense that a gratuity would hardly be legally enforceable. It may well be that the Courts of Louisiana will recognize this either by a change of climate, of atmosphere, or, more forthrightly, by a deliberate choice which those Courts are free to make (and we are not). These Courts may someday conclude that there is really little to distinguish statutory maximum medical from excess medical either in terms of cost, benefit, or legal enforceability, and consequently the general principles of subrogation recognized in the Compensation Act should entitle the Insurer to a priority for both. Nothing we here do or say is intended as even a gentle reverse-Erie breeze to...